The word finance has its origins from the French language but was later adapted into English to mean the “science of money management”. That is just one of the many ways in which it can be defined. Finance, according to academicians, is the obtaining of funds and the proper utilization of funds.
It is also a field of study which concentrates on the study of investments.
Finance consists of three major areas. Personal finance is one of them. It can be defined as all the financial activities and decisions pertaining to an individual or household. It may include purchasing of insurance or even paying off loans and debts. There are four main components of personal finance which include; savings and investments, filling of taxes, cash flow assessment and the purchase of insurance.
Secondly, there is corporate finance. This is the area that deals with a company’s funding, budgeting, capitalization and the management of risks. Basically, this means those who are in this field are faced with the task of evaluating whether or not, an investment should be made by the company and if so, how it should be paid for and do the shareholders get dividends from said investment or not.
Last but not least, is public finance. This is defined as the involvement of the government in the economy. It consists of the collection of revenue by the government, which it then uses to provide and distribute public services and goods. It also includes policies, which could be implemented to ensure equal distribution of incomes, price stability and the growth of the economy. Central banks, such as the Federal Reserve, play a key role in public finance since they influence credit and monetary policies.
Finance is at the core of all economic activities and is, therefore, an indispensable part of our lives. The above is just a tip of the iceberg that is finance. It is an expansive field which keeps on growing each day.